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Five Ways Software Can Improve Your Bottom Line

software improving bottom line
By Jim Beach, Contributing Editor

It’s a rare heavy-duty service shop or parts warehouse/distributor that doesn’t use some kind of computer software in its operation. It might be as simple as an accounting package such as QuickBooks, or as complex as a full-featured industry-specific enterprise management package.

At some point, you’ll want to upgrade or add on to the existing system. In many cases, business operators might not know what they want. They just know the system they currently use is not getting the job done.

“I would say that as many as 80% of potential customers don’t know exactly what they are looking for,” says Duff Bell, software application specialist with Karmak, Carlinville, Ill.

As Bell notes, changing your business system can be a “major pain.” There are the hard costs of the software and the soft costs associated with implementing a new system, such as training and downtime. If a new system can’t deliver in terms of increasing margins, Bell says, don’t change — because the whole purpose of such systems is making the business more profitable.

“Technology can help independents increase their margins, and saving money is all about increasing margins,” says Dick Hyatt, president and CEO of Decisiv, Glen Allen, Va.

If you are looking at reducing costs (saving money) in order to boost the bottom line, there are five basic categories where a management system helps, with specific areas within each. Improvements in any of the following areas can boost the bottom line.

1. Efficiency

Efficiency can mean delegating time-consuming pencil-and-paper tasks to the computer system, which frees personnel to concentrate on more important duties. “It comes down to asking, ‘How can this help me manage all of the transactions that occur in my business every day?'” explains David Clark, manager of business consulting for Karmak.

For instance, using a bar-coding system in a parts warehouse ensures better inventory control and quicker receiving and shipping operations. An automated system quickly identifies slow-moving products and inactive inventory. “Operators discover that 30% or more of their inventory is inactive, and that’s a real eye-opener for them,” Clark says. Using software to manage inventory can reduce that percentage significantly.

A computerized system also can find a number of small savings or margin boosters that might seem too small to devote man-hours to, but the software can find these things automatically.

“There are little tools a parts distributor may already use that a management system can do more efficiently,” Bell says. For instance, a system can automatically perform price rounding when calculating the customer price for an item. “That alone can add a quarter to half percent to your margin,” he says. A system can automatically identify slow-moving items and mark those up more than faster-moving items.

In the shop, efficiency means taking less time to write a service order, gather information (warranty information, parts prices, etc.) and perform a repair.

“Efficiency is typically thought of in terms of the service initiation process,” Hyatt says. Making diagnoses, creating an estimate and then getting approval for a repair “can be where a huge amount of time is wasted.”

To perform the service write-ups efficiently, you need to figure out what repairs or service are needed, how many labor hours are required and what parts are required. Hyatt notes that in a number of independent shops, even those with some form of business system in place, service initiation is still a manual process and an area where they could achieve huge time savings, which in turn lead to cost savings.

2. Leveraging skill sets

A business management system allows owners to leverage the skill set of highly skilled employees to establish automated processes that can be duplicated by less-skilled or less-experienced personnel.

Hyatt notes that one of Decisiv’s customers, a nationwide truck repair chain, leveraged the skill set of a few people to build 150 engine repair operations into their system. Each operation contains labor descriptions, necessary Parts and time estimates. When a customer comes in, a service writer will select the necessary repair option from a menu. In a matter of seconds, he or she can present an estimate to the customer and detailed description of the operation for the service techs.

“Having the ability to leverage a skill set to build a repeatable, replicable operation and then spread it out through the organization means the service initiation is faster, and now someone not as skilled can go from doing the diagnoses to building a repair estimate by selecting that operation,” Hyatt says. It means essentially that service writers and technicians don’t have to start from scratch when a customer comes in — the operations have been built into the system.

For parts warehouses, most systems will have a set of best practices that they are built around, Clark says. “These are tools that improve efficiency a great deal.”

3. Accuracy

Accuracy means exactly what it says. Automated systems can retrieve customer records, vehicle records, or recalls; ensure accurate inventory counts, monitor time-cards, etc. Customer billing is more accurate because labor and parts are automatically priced, which reduces human error — simple things like transposing a number or misspelling a customer’s name or street address.

In the shop, automated systems improve accuracy in terms of making sure the repair is done correctly the first time, with the with the right parts, and that the customer is charged the right amount. Such systems allow the shop owner to set time standards for repairs based on past performance.

Barcoding allows technicians to scan parts used so they are automatically added and priced out to an invoice. Technicians also can use barcoding to track when they start and finish an operation. Shop managers can use this information to find out which technicians might need additional training if they take longer than to perform an operation than the shop’s standards dictate.

4. Expectations

Meeting both customer expectations and your own goes hand in hand with accuracy. A management system means customers can know right away if parts are available, what they are going to cost and when they will be delivered. Automated systems allow customers to track their orders online via Web portals so they can better plan their own operations.

In the shop, automated systems mean the customer knows exactly what to expect in terms of cost and the time required to perform repairs. Having the ability to generate an accurate and detailed estimate means there are no surprises at the end that require the distributor or service provider to make adjustments to an invoice — an adjustment that almost always costs the provider.

5. Customer satisfaction

Along with customer expectation with accurate estimates and timely repairs, management systems help keep customers loyal. This improves the bottom line, because in general it is more costly to find new customers than to keep the ones you already have. An automated system can keep your customers in the loop in terms of their orders and service work. It establishes a communication link with customers that allows them to know what’s going on in real time.

Your system also can send alerts to your customers, notes Bell. “As soon as you invoice a repair, the system can spit out an email to the customer saying, ‘Your truck is done.'” Or, if there is a problem with a repair, you can send an email letting your customer know about the problem and what you intend to do about it.

Automated systems can increase the confidence your customers have in your abilities.

“Your customer has come to you for a repair because you are the expert,” Hyatt says. “If you take a long time to prepare an estimate, or have to update the parts list several times while performing the operation, you no longer look like an expert.”

On the other hand, if the customer can get his service work done quickly for the price agreed to up front, then that customer will most likely keep coming back.

Where to start

Software packages for shops and/or parts warehouses are available in various levels of sophistication.

Offerings from companies such as Karmak, AutoPower or Pluss include full-featured systems with individual modules such as accounting, shop time management, inventory control, automated work orders and other functions such as e-commerce packages for selling online.

Vendors such as Datalliance specialize in vendor-managed inventory systems. Some of these packages are also available as software-as-a-service applications the Internet, and these do not require the end-user to invest in computers or servers to run the software.

Platforms such as Decisiv’s service management platform do not offer accounting or other back-office automation but are designed to integrate with a number of enterprise systems.

The right system for your business will depend on your requirements, costs and expectations for a return on your investment.

From the Jan/Feb 2012 issue of HDAJ.

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2/7/2012 – Five Ways Software Can Improve Your Bottom Line

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